The $1.3 trillion omnibus spending bill and new tariffs announced by President Trump will not only drive up our national debt, but could greatly reduce the economic benefits otherwise expected through the recent tax reform bill.
On Thursday, Republican majorities in the House and Senate approved the bill to ward off a partial government shutdown and President Trump signed it after briefly considering a veto. The omnibus plus Trump’s embrace of steel and aluminum tariffs and this wee’s targeting of China for unfair trade practices has fiscal conservatives are furious with the GOP at both ends of Pennsylvania Ave.
National Taxpayers Union President Pete Sepp sees the omnibus as a disaster.
“We’re talking about an increase of $80 billion in defense spending, $62 billion in non-defense spending, a gimmick called the Overseas Contingencies Operation Account.
“Bottom line, amid rising interest rates, the additional debt that’s going to finance this bill is going to have headaches down the line, because servicing that debt is going to get costlier in addition to this spending,” said Sepp.
Sepp says fiscal conservatives really weren’t asking that much of the GOP-led Congress.
“In addition to passing tax relief and tax simplification, we were expecting them to at least hold the line on federal spending,” said Sepp.
“Congress decided earlier in the year to break the spending caps for a third time that were established in a 2011 bill called the bipartisan Budget Control Act. Congress has not kept that promise.
“For the third time, they’ve broken the caps and by deciding to do that, they had to consciously pass another law. This do-nothing Congress, as it’s been criticized for, needed to do nothing to hold the line on spending, but they wouldn’t do that. They actively plotted to undermine the caps, and this omnibus spending bill seals that deal,” said Sepp.
Both Trump and many of the congressional Republicans who backed the omnibus counter by saying only defense spending was still under the caps and the military is suffering badly as a result of austerity aimed specifically at the Pentagon during the Obama years.
They further assert the only way they could get the votes for greater military spending from Senate Democrats was to bump up non-defense spending as well.
Sepp isn’t buying it.
“That’s the politics of the deal but as policy it is rotten. Unfortunately, our defense spending establishment has had years of bloated practices, bad management and unauditable financial statements.
“If we were to demand better fiscal accountability from the Pentagon, I have the feeling, we would find a lot more resources to get to our service people who really need them, instead of just approving a huge spending increase with very, very little accountability to go along with it,” said Sepp.
However, Sepp says the omnibus could have been far more expensive and that there are a few bright spots for taxpayers tucked in there.
“The omnibus spending bill could have been a lot worse considering some of the riders that were being proposed: a new tax on travelers – a passenger facility surcharge if you will, a new act that would have empowered states to collect sales taxes on internet transactions,” said Sepp.
Sepp also says there are also elements of greater government transparency in the bill. However, he says those positive nuggets don’t outweigh the negatives of the bill and adding in Trump’s proposed tariffs make our economic outlook less rosy.
The steel and aluminum tariffs alone could be major job killers.
“There are some reports estimating that the steel and aluminum tariffs alone could cost up to 180,000 jobs in our economy, because while we’re protecting steel and aluminum manufacturing workers, other types of industries that use the steel and aluminum in their own manufacturing will be badly hit by higher prices,” said Sepp.
We can debate how many jobs might be at stake here, but at that upper level of 180,000 jobs, you’re talking about giving back as much as half of the jobs created by the tax cut act,” said Sepp.
Sepp hopes Trump’s new chief economic adviser, Larry Kudlow, will be able to pivot the president away from tariffs. He says Kudlow is clearly on the record as opposing such policies.
“He said, essentially, that when we impose tariffs on another country’s imports, we’re imposing sanctions on our own consumers. That’s exactly what’s going on here and the amount of sanction could be very significant,” said Sepp.